Rich Nations Pitch $5 Billion to Fund South Africa Coal Exit

(Bloomberg) --

Envoys from some of the world’s richest nations met with South African cabinet ministers on Tuesday to discuss a climate deal that could channel almost $5 billion toward ending the country’s dependence on coal.

That funding would be comprised mainly of loans, along with some grants, according to a person familiar with the discussions, who asked not to be identified as the matter isn’t yet public.

The delegation is trying to hammer out an agreement that can be announced at the COP26 climate talks, which start in Glasgow, Scotland on Oct. 31. The discussions with South Africa -- the world’s 12th-biggest emitter of greenhouse gases -- include representatives from the U.S., U.K., Germany, France and the European Union. The delegation was led by the U.K.’s COP26 envoy John Murton.

“We need certainty and predictability of the quantum of financing available to us, to accelerate this transition,” South Africa’s environment department said in a statement on Wednesday. “We do need an irrevocable agreement that we can sign at COP26 where our commitments, as all parties, are clear.”

While South Africa is under pressure to cut its dependence on coal -- which accounts for more than 80% of its power generation -- it needs finance to facilitate the transition to cleaner energy. Developed nations may also need to find a way to address the challenges faced by South Africa’s state-owned power utility, which is burdened by 400 billion rand ($27 billion) of debt.

Unions, Business

The envoys met Tuesday with South African ministers including Pravin Gordhan, the public enterprises minister whose portfolio includes oversight of power utility Eskom Holdings SOC Ltd., Barbara Creecy, the environment minister, and Ebrahim Patel, the country’s trade and industry minister, and David Masondo, the deputy finance minister, according to the government statement. No officials from the energy department were listed as attendees.

Talks were held on Wednesday with South Africa’s politically powerful labor unions, business leaders and the Presidential Climate Change Coordinating Commission, three people familiar with the arrangements said. 

Those talks encompassed the need for support for coal-dependent communities and the use of gas as a transitional fuel while the country’s renewable energy industry expands, one of the people said. Electric vehicle manufacturing and the creation of a green hydrogen export industry were also discussed, according to the environment department.

Some senior members of South Africa’s government are pushing hard for climate mitigation measures. President Cyril Ramaphosa chairs the climate commission he created last year and its more ambitious emissions reduction target was adopted by cabinet this month.

“South Africa is well positioned to obtain concessional finance both for the country-wide climate transition and the electricity transition in particular,” Gordhan said in a response to queries before the meeting. 

Still, the pivot from coal faces opposition within South Africa. Gwede Mantashe, the country’s energy minister, has advocated for the construction of new coal-fired power stations. Mantashe, the former head of the National Union of Mineworkers, is the politically influential chairman of the ruling African National Congress.

The Department of Mineral Resources and Energy deferred questions to the environment department and didn’t respond to queries about Mantashe’s role in the talks.

The move to reduce South Africa’s reliance on coal comes as Chinese demand pushes prices toward record highs. The dirtiest fossil fuel, which was struggling against cleaner energy sources, is now seeing its biggest comeback ever, complicating international climate talks set to begin in just a few weeks.

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